As per the changes in the Foreign Exchange Management Act (FEMA), over 20 per cent Tax Collected at Source (TCS) will be levied on international credit card transactions from 1 July. Many taxpayers are concerned that they might experience financial difficulties as they would now be charged an additional 20 per cent by TCS on credit card purchases made while travelling abroad and booking overseas tour packages. However, as per the Finance Ministry of India, payment of TCS is not a part of the final tax. It can be claimed by filing ITR at the end of the financial year. “If the TCS payee is a taxpayer, he can claim credit for TCS as his tax payment against his regular income,” the Ministry of Finance tweeted. At present, you have to pay a TCS of 5 per cent while booking foreign tour packages.
The e-Gazette notification dated 16th May 2023 omits Rule 7 of the FEM(CAT) Rules, 2000. Here are the Frequently Asked Questions #FAQs w.r.t. Tax Collection at Source (TCS) on foreign remittance through the Liberalised Remittance Scheme. @RBI (1/2)👇 pic.twitter.com/CLJyHQh5ub
— Ministry of Finance (@FinMinIndia) May 18, 2023
Related Articles
Bank fixed deposit interest rates likely to dip; know why
Zepto: Meet duo who built a Rs 7000-crore firm in 1 year; know their net worth
However, there are several ways through which you can save taxes while travelling abroad. Before moving further, you should also know that as per the new rules, there will be no TCS levied on payments done by international credit and debit cards up to 7 lakhs.
International debit or credit card payment within 7 lakhs
If you are booking an international tour through a foreign website and payment is done through an international debit or credit card, then 20 per cent TCS is not levied on those transactions if the amount is below 7 lakhs. From 1 July, no TCS will be imposed on payments done through foreign currencies or forex cards, if it’s within the threshold limit, said the Ministry of Finance on 19 May.
Don’t book everything from one place
On international tour packages, a TCS of 20 per cent is charged. It won’t be applicable if you buy your ticket directly from Air India, Vistara, or IndiGo. In a similar vein, if you book a hotel straight through the hotel website and pay with a debit or credit card, you won’t be required to pay a TCS as long as the total is under Rs 7 lakh. When travelling with friends or family, especially when you’re going in a group, you can use the Rs 7 lakh limit separately by booking tickets separately. This will enable you to divide the whole cost so that each participant uses their allotted Rs 7 lakh.
Avoid Paying higher TCS after buying foreign exchange
It’s better if you buy international debit or credit cards, to save yourself from higher TCS. You can buy the cards before 30 June to exempt yourself from 20 per cent TCS, which will be applicable from 1 July. You can buy foreign exchange currencies or Forex cards before the due date.
For international debit and credit cards, the maximum exception will be 7 lakhs, crossing which, you will have to pay 20 per cent TCS. Therefore, you can use multiple debit and credit cards to book your flights and hotels but make sure that the maximum sum doesn’t cross the threshold limit.
Read all the Latest News, Trending News, Cricket News, Bollywood News,
India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.